During the final week, or so, of a month, the U.S. Department of Commerce releases its report on orders for durable goods, or specifically new orders for manufactured durable goods. These are long-lived products, as the durable goods term suggests, that are often categorized to last three or more years. The order number is given in the aggregate, as well as excluding orders for transportation equipment (e.g., aircraft) and defense products. The large dollar amount of such offerings can skew the overall result, so the composite figure is further broken down.
Note that the survey provides statistics on manufacturers’ value of shipments, new orders (net of cancellations), end-of-month order backlogs, and inventories. The data cover the month prior to the report’s issuance.
Within the non-transportation and non-defense categories are included orders for primary metals, fabricated metals, machinery, electrical equipment and appliances, and capital goods products.
The report also includes shipments of manufactured durable goods, unfilled orders for manufactured durable goods, and inventories of manufactured durable goods. Along with this breakdown, we will get revised data for the prior month, covering new orders, shipments, unfilled orders, and total inventories.
As a series, orders for durable goods tend to be more volatile than most given the often sharp month-to-month swings in transportation and defense items, due to the large-ticket nature of these prices. Financial markets are often materially affected by the release, which is timed to be an hour before the opening of the market that morning. It should again be emphasized that the report is volatile and restatements can be sizable.
Orders for durable goods are an important gauge of consumer and industrial sentiment and demand. As such, and notwithstanding their volatility and unpredictable nature, they should be considered in assessing the overall health of the U.S. economy at any point in time.